[Music] all right BR. We've talked about using cash. We've talked about liquidating brokerage assets. We've talked about borrowing against the equity in our homes. There actually is a fourth option that we've seen people use for large purchases, and this is what I don't think people are super familiar with. There are actually asset-backed loans where you can borrow money against your investment portfolio. So, that account that you said, Hey, I could liquidate the asset, and I could take some of those assets and go buy this purchase, there is an option where you could say, Hey, instead of liquidating those assets and triggering those taxes, I'm going to borrow against the portfolio. That is an option that exists today. Let me tell you how this goes down because I deal with this all the time. I'll get a call from my client who's retiring, and they're downsizing and moving to a... either they could even be staying in the same community, but they're going into a smaller home, and they'll call me

up, and they say, Brian, um, I'm gonna need you to come up with about $600,000 from the portfolio. And I'm like, Whoa, $600,000, okay, I can do it because you've done, you've been diligent, you've been saving. But you realize there's probably going to be a tax bill of about $75,000 when I place all these trades. And I'm like, Oh man, that stinks. I hate that I'm going to have to pay $75,000. But I just, I don't want to go do a mortgage. I'm at retirement. Why should I go do a mortgage on this new house? It's like, If there's only a way I could sell my existing home and then have those proceeds needs to buy. It's just the timing doesn't work. CU, I'm going to sell this house here. I'm going to have all this money come in, but in this moment in time, I need this money so I can put the down payment or even pay for this piece of real estate. I'm like, Relax, we got you covered. This is

Why you have a financial planner. We have all kinds of banking relationships and others where we can actually, in this moment in time, do a loan that will be secured by your investments because you've been there. There is value to you being diligent and saving that banks will give you these loans, and a lot of times they're interest-only. We'll go through the details of them, but they are a blessing when you think about you just have a moment in time need, is that you're going to sell this much bigger home to buy this smaller home, but you just need a bridge to get you in, and so you don't have to make a desperate decision and pay all these additional taxes when you just didn't want to. This thing perk up because this is pretty exciting. That's exactly what we think they should be used for, them short-term bridge loans where it's a finite time period and you have extreme confidence you'll be able to pay it off quickly, or we have used these when there's a large purchase, but maybe you

want to spread out the tax bill over multiple years. So, rather than selling all the brokerage assets this year and triggering all the taxes, you could do that for a portion, borrow for a portion, and spread that over multiple years. Those are viable use cases for using a collateralized or asset-backed loan. Here's what we don't want you to use them for. It's likely not going to be great for long-term financing solutions because the rates are not fantastic, oftentimes, and they're very variable. They go all over the place. They're tied to one-month overnight lending rates plus some type of fixed spread, so they can be pretty expensive. And we don't want you to use it for lifestyle. You should not be borrowing against your portfolio to live a higher standard of living. So, you want to make sure that if that's what you're doing, if that's why you're using this, you rethink that because there are some considerations you want to make because these loans are different than other types of loans. The first is you want to know what the capital call

thresholds are obviously the financial institution is willing to loan you money based on the value of your account. Well, if the value of your account is invested and it's in a stock portfolio or an equity-type portfolio, and the market goes down all of a sudden, that asset backing your loan becomes less and less and less valuable. Well, at a certain threshold, the bank will say, Hey, there's not enough money here to secure this loan. We're going to need you to either start liquidating assets or start depositing funds to get the collateral back up to the minimum threshold. So, you need to make sure you understand where the capital call thresholds are. Yeah, and you also need to understand, does this impact your behavior with these accounts? Because it's not uncommon that the banks might put some restrictions on your access money out or using this money for other purposes because it is tied to it until you pay this loan off. You have another person that's kind of having a voice in your decision-making on that, and

don't forget I mentioned this earlier. These often are interest-only, so you're not actually until you actually go to start paying it off. And hopefully, when you sell the real estate or whatever that moment in time is, they're going to be building in the background, interest-only, and potentially it's deductible. But you just pay attention to the fact that I don't want you to get too comfortable because this is the last cautionary point. It's going to feel a little bit like Monopoly money because, you know, it's an easier process than traditional mortgages. So, it just feels so simple to take, make this some realize it. This is a big deal. It's debt. Debt is not less than ideal but is definitely a tool that you need to be aware of.

How Asset-Backed Loans Can Fund Big Purchases (and the Pitfalls to Avoid)

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